Buying power from Industrials

I heard that you all will be doing origination and working with industrials.
Here is some information. Jim Steffes (head of gov't affairs for ENA) will
be talking with Ray Bowen about the possibility of making a similar filing
for EPMI.
---------------------- Forwarded by Christi L Nicolay/HOU/ECT on 10/10/2000
01:02 PM ---------------------------

From: Christi L Nicolay 10/06/2000 11:54 AM

To: Edward D Baughman/HOU/ECT@ECT, Joseph Wagner/NA/Enron@Enron, Raymond
Bowen/HOU/ECT@ECT, Dennis Benevides/HOU/EES@EES, George
Wood/Corp/Enron@Enron, John Llodra/Corp/Enron@ENRON, Janelle
Scheuer/HOU/ECT@ECT, Tom Swank/HOU/ECT@ECT, David Fairley/HOU/ECT@ECT, Mike
Curry/HOU/ECT@ECT, Terri Clynes/HOU/ECT@ECT, Oscar Dalton/HOU/ECT@ECT, Joe
Gordon/Corp/Enron@Enron, Mike E Kelly/NA/Enron@Enron, Joseph
Piotrowski/NA/Enron@Enron, Zachary Sampson/NA/Enron@ENRON, Dave
Mangskau/Corp/Enron@ENRON, Doug Sewell/HOU/ECT@ECT, Posey
Martinez/HOU/ECT@ECT, Sheila Tweed/HOU/ECT@ECT, Bob Carter/HOU/ECT@ECT, James
E Keller/HOU/EES@EES, Robert Frank/NA/Enron@Enron
cc: Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Mary
Hain/HOU/ECT@ECT, Sarah Novosel/Corp/Enron@ENRON, Joe
Hartsoe/Corp/Enron@ENRON, Donna Fulton/Corp/Enron@ENRON, Harry
Kingerski/NA/Enron@Enron

Subject: Buying power from Industrials

Below is information about a FERC order allowing a power marketer, like EES
or EPMI, to file to effectively act as an industrials "agent" when buying an
industrial's excess power to insert into the grid. Generally, an industrial
would be required to obtain its own FERC power marketer license (takes about
60 days) in order to sell into the grid. EPMI and EES have not requested the
"Impower" type agent authority yet, but I have been asked to file this for
EPMI (and, Dennis, we could file for EES too, let me know).

If FERC allows EPMI and EES to do this, then we would make quarterly filings
on behalf of any industrials from whom we buy power at wholesale and they
would not have to make their own FERC power marketer filings. (Also, Enron
generally has to also file for "EWG" Exempt Wholesale Generator status due to
utility rules; however, if the industrial is primarily an industrial business
in something other than power generation, an EWG determination is not
required.)

I will keep you advised on the status of the filing(s) once made.

Subject: In Power Marketing --FERC order

On 3/30/2000, FERC issued an order accepting InPower's market based rates
schedule that would permit entities that own generation to meet their own
loads or for back up purposes (IPPs) to sell power at market based rates to
InPower (on a profit share basis). InPower made the filing stating it
estimated that IPPs in MAIN (and, specifically, Wisconsin) could supply a
substantial portion of the summer energy shortfalls (FERC did not limit
ImPower to IPPs in MAIN). InPower did not name any specific IPPs; however,
to be eligible under ImPower's program, an IPP must control generation
primarily for the purpose of meeting on-site demand or providing back-up
generation and have such generation located on its premises or premises
approved by the local utility. Further, the generation must be capable of
producing electricity either synchronous with the local utilities' grid or
commensurate with agreements with the local utility. Total sales made by
IPPs in ImPower's program would not exceed 1000 MW/ hour. The IPPs are in
businesses other than the sale of electricity and are simply seeking
"incremental return on the often-unused capacity of their generation assets."

When an IPP participates in ImPower's program, it becomes subject to FERC's
jurisdiction as a "public utility."

Jacksonville Electric Authority (JEA) protested ImPower's filing stating it
allows retail customers to arbitrage retail and wholesale power markets by
purchasing power at average, embedded cost retail rates and simultaneously
using their generating facilities to sell power at wholesale to ImPower (at
peak times). FERC addressed JEA's concerns by saying that the IPPs cannot
violate any rules and requirements properly imposed on the retail sales made
to those suppliers.

This order allows ImPower (as an aggregator) to make the required quarterly
filings for the IPPs and the IPPs do not have to apply for separate market
based rates authority. The are some additional reporting requirements FERC
waived for the IPPs: accounting and reporting, issuance of securities and
interlocking directorates (an affidavit is still needed).

Please let me know if you would like a copy of the filing or order.